Banks Allowed To Lend Against Infra, Housing Bonds Issued By Them – Business Line – 28-Nov-2014

December 2, 2014 - Uncategorized

To provide liquidity to retail investors investing in long-term bonds issued by banks for financing infrastructure and affordable housing, the Reserve Bank of India on Thursday said banks can extend loans to individuals against these bonds.

The central bank said boards of the banks should lay down a policy prescribing suitable margins, purpose of the loan and other safeguards.

Ceiling

Further, such loans should be subject to a ceiling, say, ₹10 lakh a borrower, and tenure of loan should be within the maturity period of the bonds.

However, banks are not permitted to lend against such bonds issued by other banks.

In July, the RBI had issued detailed guidelines for banks to raise long-term resources to finance their long-term loans to infrastructure as well as affordable housing.

This was aimed at promoting both growth and stability, as well as improving the supply side.

According to the guidelines, the bonds will be fully paid, redeemable and unsecured and would rank pari-passu along with other uninsured, unsecured creditors. The minimum maturity period of the long-term bonds shall be seven years.

The infrastructure sector comprises categories such as transport, energy, water and sanitation, communication, and social and commercial infrastructure.

For the purpose of raising long-term bonds, the RBI has defined affordable housing as loans give by banks to individuals up to ₹50 lakh for houses of values up to ₹65 lakh located in the six metropolitan centres — Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad — and ₹40 lakhs for houses of values up to ₹50 lakh in other centres for purchase/construction of dwelling unit a family.

The Hindu Business Line

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